Settlement Eyed In Crete Bankruptcy

A settlement may be on the horizon in a bankruptcy trial involving a failed Crete land deal that also is mentioned in a federal indictment against developer Michael Halikias.

On Monday, less than a week after the indictment of Burr Ridge attorney David Roth--an alleged Halikias associate who was scheduled to testify in the bankruptcy trial--the bankruptcy proceeding was delayed so that lawyers could discuss a settlement.

Seven angry investors filed the bankruptcy case three years ago in connection with a flopped commercial development near Illinois Highway 394 and Steger Road.

The case seemed to get a jolt from the recent indictment charging Roth with fraud in connection with his work for Connaught Corp.

Roth and Halikias are accused of using Connaught to make secret profits on land deals, including the Crete project. They are alleged to have done so with the help of former Connaught officer David Wabick and associate David Heyes.

Prosecutors charge that the men did not tell investors that a Connaught-affiliated entity was the owner of the properties, allegedly allowing them to sell the land at inflated prices and pocket the difference.

Connaught Corp., a syndicator of real-estate limited partnerships, was based in Lansing, but is under different ownership in Matteson.

In the Crete deal, called the 394 Venture Limited Partnership, federal prosecutors allege that Halikias, Wabick, Heyes and Roth made an illegal $600,000 when the land was bought in the late 1980s by a limited partnership involving roughly 80 investors.

The deal was among those highlighted in an indictment Wednesday that broadens fraud and perjury charges brought Oct. 8 against Halikias, Wabick and Heyes, and added Roth as a defendant.

Halikias has strongly denied he had any connection to Connaught, and he said he looks forward to clearing his name. Wabick and Heyes pleaded innocent to the original indictment. All men are to be arraigned later this month.

The Crete project landed in Bankruptcy Court after the partnership filed in 1994 for a reorganization of its debts under Chapter 11. Seven investors fought the move, charging the partnership was mismanaged by Connaught, the general partner, and asking the court to appoint a trustee to oversee a sale of the assets.

The investors were Alan Kadet, Manny Hoffman, John Glennon, John Lison, George Pappas, Trygve Bakkom and Sherman Rosen.

In May 1995, the court appointed a trustee and granted the investors' request that the partnership be put into Chapter 7 so that the assets could be liquidated.

The liquidation was stalled three months later when the partnership's outstanding $350,000 loan allegedly was assigned from DuPage Valley State Bank to a corporation called Steger Development. Roth allegedly aided in the transaction.

Michelle Novick and Howard Adelman, attorneys for the plaintiffs, charged in court documents that Steger Development had ties to Connaught and alleged that the loan was secured by money from another Connaught limited partnership. They argued that the land should be free and clear of the debt.

But according to court documents, Paul McLennon Jr., attorney for the development, argued that Steger is a completely separate entity that has no connection to Connaught.